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Market Trade Setup 31st May

Start of the June series and we are going to start this June series with a New Prime Minister and his cabinet. All the excitement of May in terms of elections, Q4 numbers, election results and the cabinet formation are all over and now we are going to resume business. Global factors will start to assume importance and globally things are not looking great. The Chinese manufacturing PMI for May comes at 49.4 which means the manufacturing sector in China is actually contracting.

Though the US ended in mild positive last night this news early morning pushed Dow futures 150 points down and many Asian markets have gone into the red. Japan is down 200 points and Hong Kong is down close to 100 points. The only positive is the Brent Crude which dropped to 66.1 dollars from 69.5 dollars and that is good news for India.

On the domestic front, there are plenty of domestic cues to watch out for. The first thing is who is going to be the Finance minister and the commerce minister. Amit Shah is expected to take over Finance and Piyush Goyal might keep Commerce and Railways but these are all speculations and what is there in PM’s mind is nobody’s guess.

Goyal can be given finance too. The cabinet meeting is scheduled at 5 PM today and by then we will know the portfolios. The next big news coming in at 5.30PM is the Q4 GDP numbers and with a lot of slow down seen in February and March and looking at the Q4 results the expectation is 6.3 to 6.5% GDP and 6.2 to 6.4% GVA. Agriculture is likely to be around 2%, the industry should be close to 6% and the services sector will be around 7.5%. 

What to expect from the June series?

Today is the start of the June series and with May series ending at 304 points higher, we now have the bulls leading 4-1 with the last 3 months going for bulls. This will put some pressure on bulls to sustain this. In the last 5 June series, 3 went to bears while 2 went to bulls and the margins are also very narrow and 4 out of 5 June series is a narrow series.

There were 72% rollovers from May to June and many of them are long position rollovers and with this, we will begin June series with 60% long and 40% short positions. On the options side, the Nifty put-call ratio is at 1.64 and this is considered to be slightly bullish. For the monthly expiry on the put side, 11500 is the support and on the call side, 12500 has highest open interest making it the resistance. For the 6th June expiry, however, 11800 on the put side and 12000 on call side has the highest open interest. 

What is the Nifty call for the day?

We had March, April and May series adding 1100 points to Nifty and looks like Nifty will take some rest in this series. Today is the first day and we have a lot of things to look for today as well as in this series. GDP numbers are going to come today evening and there is RBI credit policy on 6th June and the monsoon arriving and its progress will be the issues. This month will be quite volatile and traders have to play with a month very carefully.

Today we will start flat around 11940-11960 zone and we will encounter the resistance at 12020-12060 levels which will be tough to overcome. On the downside 11850-11880 is the support. I would suggest going long if Nifty stays above 11900 mark in the early morning trade and take this long position with 50-60 points target from the point you take. You can risk taking the positions to next week if targets are not met, but exit if you reach the target.